There has been a major shift in how American consumers behave when they go shopping in the current 'never normal' retail environment, with cut-backs being seen in most categories except for necessities, according to the latest 'How America Shops' study published by WSL Strategic Retail.
The American shopper's mindset has shifted since 2001, reflecting what WSL describes as a "never normal" retail environment. As a result, the report says, consumers have become more anxious, cautious, and calculatingly price-conscious. Many have reduced their spending across most of the key indicator categories measured by the How America Shops bi-annual study.
By "never normal", retail consultants Wendy Liebmann and Candace Corlett refer to a retail decade in which shoppers seek safety and security in their day-to-day lives, as well as in their shopping life. "After 9/11, consumers found themselves in a 'new normal' retail landscape, as we reported in 'How America Shops 2004', but today they reel in a 'never normal' world rife with shocks that range from corporate scandals, war and tsunamis, to hurricanes, see-sawing oil prices, and more," explained Liebmann, WSL Strategic Retail's founder and principal.
Main loyalty driver
Overall, consumer spending is down, while the frequency and variety of shopping trips has held steady. According to WSL, the retail landscape has reached a state of saturation, and service has re-emerged as a leading consumer demand and loyalty driver.
Reacting to these uncertain times, women have reduced their spending across six key expenditure categories (shopping, savings and investment, education, leisure travel, entertainment, and 'on myself') by a net average of -17 points.
Limited increases
And, while 'shopping' was the only category to show a net spending increase (+6 points), these purchases were on necessities, including food, medicine and pets. In contrast, spending fell sharply for discretionary categories such as cosmetics, fragrance, and home decor.
Of the fourteen leading indicator categories surveyed, only pet supplies (+19 points), food (+18 points), and prescription medications (+18 points) showed substantial net increases in spending over the previous year's study.
"There were dramatic declines in everything from cosmetics to computers. But this isn't necessarily about using less or doing without," explained Corlett. "Rather, it's about smart shoppers buying at the lowest price, travelling further to save money and trading down to lower-priced brands."
Frequency unchanged
While consumers spent less overall, they still shopped at almost the same number of outlets (3.6 in 2006) each week as in 2004 (3.4) and made the same number of weekly shopping trips (3.9) in 2006 and 2004. According to Corlett, shopping combines both necessity and entertainment, so while consumers may have to less money to spend, it doesn't always affect their enjoyment of the shopping experience. But today's women shoppers are the most price-conscious, and are less willing to pay a premium for convenience than in previous years.
While anxiety impacts all income groups, a growing gap has emerged and widened between locations where the affluent and lower-income consumers shop. For the first time in many years, WSL reports that the choice of shopping location is now largely determined by how much money a shopper has.
According to Liebmann, "Throughout the 1990s and the early years of the 21st century, consumers of all income levels shopped through most retail channels. In fact, Wal-Mart drove this phenomenon by letting low-income shoppers know that they were entitled to name brands at low prices. Then Target taught them they were entitled to great design at low prices everyday. At the same time, higher-income shoppers stretched their dollars by shopping at discount and club channels. But today, most shop where they can best afford things without undue temptation."
Channels stagnating
According to WSL, retailers can no longer expect to gain new shoppers in the coming years, as retail reach has been maximised. This means that retailers will soon need to focus more on building shopping frequency and transaction size.
Until 2006, many channels (including the supercentre, warehouse club, dollar store and the internet) consistently attracted a broader base of shoppers year-on-year. But when WSL asked where consumers had shopped in the past 90 days, there was little growth since 2004 in the percentage of people shopping through any of the channels.
New loyalty drivers
The firm's studies have shown in the past that the key to building lasting customer loyalty has moved beyond the usual factors of price, product and location. Emotional factors, such as "a good place to spend time browsing" and a place that "attracts customers I feel comfortable around" now play a key role.
But what matters most to shoppers now, the survey found, is "service with respect". According to Corlett, service with respect has become the foundation on which store loyalty stands: "Women want bargains, to accomplish a lot in one trip, and to get interesting items, but if the level of service and respect is found wanting, none of that matters."
The study was based on interviews with 950 consumers (760 women and 190 men, aged 18-70).
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